Address by The Hon Lindsay Tanner MP
Minister for Finance and Deregulation
Tuesday 10 June 2008, 12.15pm, Brisbane
It’s always a pleasure to address a CEDA audience, and I’d like to acknowledge the important role CEDA has in connecting the worlds of government and economics to debate the key issues facing Australia’s future.
Last week I spoke to the CEDA State of the Nation conference in Canberra about how the government is pursuing efficiencies and value for money through our Razor Gang Stage Two.
Today I’d like to outline a Rudd Government reform agenda that is no less important for improving the quality of government spending across Australia. That agenda is reforming regulation across the federation.
I have long argued for the need for better cooperation between the various levels of government in Australia. I now have the honour of being the Commonwealth’s first Cabinet Minister for Deregulation, working with my colleague Dr Craig Emerson, Minister Assisting on Deregulation
Today I’d like to address the conceptual approach the government is taking to deregulation across the federation - an approach best described as ‘regulate nationally, deliver locally’.
If Australian businesses are to compete and succeed, they cannot afford to be tied down by the red tape, complexity and duplication that block the emergence of a seamless national economy.
Equally, if Australian families are to enjoy world-class services in areas such as health, education and housing, the federal-state policy architecture must focus less on micromanagement and more on delivering outcomes at the local level.
And all of this must be underpinned by reform to Federal-State financial frameworks - with a focus on outcomes, a new transparency of performance against agreed milestones, and strong incentives to drive results.
At the recent 2020 Summit participants across all of the streams talked about the need for a national approach to the policy problems Australia faces today and into the future.
In the economic policy stream I attended, participants called for a seamless national economy, with truly national product and labour markets.
Rural participants called for urgent nationwide harmonisation and standardisation of regulatory regimes governing transport and agriculture.
Discussions on the future of Indigenous Australia identified the need for better coordination of Commonwealth and State services. Participants in the health stream sought a more integrated heath system.
Throughout the summit and across Australia there is recognition that our federation is a mess.
We have the system we have today because of where we started - a collection of separate entities, joined together to form a federation. The processes, responsibilities and authority all stem from that position.
In the intervening period, technological change and an increasingly global economy have transformed Australia in ways our colonial forebears could not have imagined.
The division of responsibilities between the Federal and State levels may have seemed appropriate in 1901, but more than 100 years on it is very difficult to explain, much less justify.
Overlapping, unclear or inconsistent allocation of responsibilities creates incentives for cost-shifting, blame game politics and unnecessary interference in the affairs of other governments.
This diverts governments from their key tasks. It also creates confusion for Australians who have to work out how to interact with multiple levels of government or comply with a number of regulatory regimes.
One major Australian business recently found it took two years and eight different state and local government processes to get approval to transport an unusually shaped load by trailer between Victoria and Queensland.
The Productivity Commission’s best estimate is that this maze of overlapping and inconsistent regulatory regimes costs Australia up to 4 per cent of GDP per annum, or $40 billion this year in compliance costs.
The 2020 Summit proposed that an independent Federation Commission, potentially part of the Productivity Commission, be charged with identifying areas of overlapping Commonwealth and state regulation that should be streamlined.
The Summit recommended that the roles and responsibilities of federal, state and local governments in areas of major economic activity be completely rethought.
The Prime Minister has undertaken to respond to the recommendations of the 2020 Summit, including the idea of a Federation Commission, by the end of 2008.
The economic policy stream of the 2020 summit has posed a vital question - if we started from scratch, how would we design the federation? What would a new model of Australian Federalism look like?
Reforming the federation is critical if Australia is to face the challenges that confront us.
We are not pursuing this task in a piecemeal way.
It needs to be based on sound guiding principles.
I should declare my own history here. In my first speech to Parliament in 1993, I advocated the abolition of state governments.
In an article I wrote for New Matilda in 2004 I proposed uniform national regulatory regimes and dividing funding and service delivery roles between the Commonwealth and states respectively.
I no longer think that abolition of the states is the most practical or desirable reform option. But I do want to see a much clearer delineation of the roles and responsibilities of the different levels of government.
The Rudd Government’s reform agenda reflects a simple but powerful concept which guides our approach to federalism: ‘regulate nationally, deliver services locally’.
When Labor took office in November last year, we set to work straight away with the states to end the blame game and work together to secure better outcomes from the Federation.
And already we are well advanced on two initiatives that follow the principle of ‘regulate nationally, deliver locally’.
The first is the work through Council of Australian Governments (COAG), and in particular the Business Regulation and Competition Working Group, which I co-chair with Dr Emerson, to reform and harmonise regulatory regimes across the states and territories.
In March, the Working Group presented COAG with a list of 27 areas of regulatory reform. Some are long-standing issues where the need for nationally consistent laws has been talked about for years, but reform has repeatedly stalled.
First among these is the landmark agreement to finally harmonise occupational health and safety laws across jurisdictions. We understand this is a top priority for businesses across Australia.
Others are emerging reform areas, where the internet and other technology have created opportunities for businesses to trade interstate, running ahead of regulatory regimes that do not cover new activities or which stop at state boundaries. Examples include electronic conveyancing and consumer protection in financial services.
This is not harmonisation for its own sake. Removing impediments to national markets ensures a consistent set of rules, creates a level playing field for businesses regardless of where they are located, and maximises the mobility of resources in a capacity-constrained economy.
This does not mean a Commonwealth takeover.
A nationally consistent regulatory framework can still be delivered through local enforcement and compliance networks.
For example, the Ministerial Council for Consumer Affairs agreed on 23 May 2008 to implement a single national product safety law. Under the new system businesses will only have to comply with one set of product safety laws, regardless of where in Australia they are located or sell their goods.
However, this national law will be of little use if there are no inspectors on the ground in local communities ensuring businesses are meeting those standards.
As such, state and territory fair trading offices will retain joint enforcement responsibility. In particular, states will continue to monitor compliance at the local level and retain the power to issue interim product bans as an immediate response when they uncover dangerous goods.
In other areas, where services are easily traded across traditional state boundaries, an entirely national market may be the most appropriate model. It would seem more sensible to have not just nationally consistent regulation, but a completely national regulatory approach. In this case the Commonwealth should take responsibility for regulation and enforcement.
For example, financial products can easily be sold across borders and enforcement does not depend so heavily on site visits or on-the-spot inspections. For this reason, the Commonwealth has proposed that it be the sole regulator of financial services and providers such as trustee companies, margin lending, mortgage broking and non-deposit taking financial institutions. The states and territories have agreed to this approach.
The Government’s reforms to Federal-State financial relations benchmarks outcomes recognise that setting a central framework which targets outcomes delivered at a local level is a more effective way to fund key services such as health, education and housing.
At the COAG meeting on 26 March 2008, the Commonwealth, states and territories agreed on a new model of cooperative Federal-State financial arrangements.
Under the previous approach, states and territories received approximately 90 different Specific Purpose Payments (SPPs), each with their own negotiating, administrative and monitoring processes. These SPPs usually included highly prescriptive requirements about the use of funds disbursed to the states and territories. Under the Howard Government, this meddling in state and territory responsibilities reached ludicrous levels, with the national government using its funding power to require the mandatory installation of flagpoles in all government schools. The new arrangements will be designed to relieve the burdensome prescriptions imposed on state service delivery and move to a more hands-off approach underpinned by outcomes-based public accountability.
Rather than linking funding to a school displaying a suitably sized plaque acknowledging the contribution of the Federal Government, the new arrangements will allow states and territories greater freedom to determine how services should be delivered to local communities and families.
Cutting the number of SPPs and replacing the conditions on how the money is to be spent with outcomes that are to be achieved will:
The Rudd Government has committed to provide National Partnership payments to reward those jurisdictions which deliver on specific performance benchmarks. The quality of their administration of base funding will in turn determine whether they qualify for additional funding, based on agreed benchmarks of performance.
The new arrangements the Rudd Labor Government is putting in place to reform the Federation are based on the principle that once national frameworks - regulatory or financial - are set, choices about the delivery of outcomes within those frameworks should reflect local preferences.
These reforms will deliver real benefits for Australian families and their communities, not only today also for future generations.
Australia’s federation is in desperate need of reform. The piecemeal, short-term tinkering of the past has not delivered results. The endless political manipulation of the Howard era has put our federal system into intensive care. It’s time to conduct a comprehensive overhaul based on clear principles, not political interference.
Those principles are simple. We need a seamless national market governed by regulation that is either national or nationally consistent. And we need responsive service delivery controlled by the levels of government closest to the users of those services. These reforms will deliver large efficiency and productivity dividends for the nation’s economy and transform the delivery of services to our citizens.
They reflect the Rudd Government’s commitment to building a modern Australia. Our long-term prosperity depends on reforming our framework of government to reflect the realities of our twenty-first century economy and society.
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